Media Ignore Study On Real Price Of Coal-Fired Power

A study published in the prestigious journal American Economic Review estimates that the costs imposed on society by air pollution from coal-fired power plants are greater than the value added to the economy by the industry. The study concluded that coal may be "underregulated" since the price we pay for coal-fired power doesn't account for its costs.

According to a Nexis search, not a single major newspaper or television network has covered the study. By contrast, an industry-funded report on the cost of EPA regulations of these air pollutants has received considerable media attention.

The authors of the American Economic Review paper -- Nicholas Muller of Middlebury College and Yale's William Nordhaus and Robert Mendelsohn -- are considered centrists. Mendelsohn opposed the Kyoto climate treaty and spoke this year at the right-wing Heartland Institute's conference on climate change.

Economist Paul Krugman wrote that the study should "be a major factor in how we discuss economic ideology," adding "It won't, of course." From Krugman's post:

It's important to be clear about what this means. It does not necessarily say that we should end the use of coal-generated electricity. What it says, instead, is that consumers are paying much too low a price for coal-generated electricity, because the price they pay does not take account of the very large external costs associated with generation. If consumers did have to pay the full cost, they would use much less electricity from coal -- maybe none, but that would depend on the alternatives.

At one level, this is all textbook economics. Externalities like pollution are one of the classic forms of market failure, and Econ 101 says that this failure should be remedied through pollution taxes or tradable emissions permits that get the price right. What Muller et al are doing is putting numbers to this basic proposition -- and the numbers turn out to be big. So if you really believed in the logic of free markets, you'd be all in favor of pollution taxes, right?

Earlier this year the coal industry group American Coalition for Clean Coal Electricitysponsored a study concluding that two Clean Air rules would result in the loss of "1.4 million job-years by 2020 and increase electricity rates by over 23 percent in some areas." Neither of the rules had been finalized at the time.

It's not exactly news that regulated industries release studies warning about (exaggerating) the impact of EPA rules. But it is newsworthy that at a time when the GOP and conservative media are labeling air pollution limits a "war on coal," a major economic study finds that we have a long way to go before the damages of coal power are properly accounted for.

Update (10/17/11): Greenwire emails to let us know that they also covered the American Economic Review paper in a October 4, 2011, article (subscription required), which is not in the Nexis database.